Market Indicators for the Home Building Industry in Northwestern Wisconsin March 2012 Volume 2, Issue 3
Pick-Up in New Home Construction and Jobs? Economists Think So Economists are increasingly confident that some pillars of the economy will improve this year, but they still remain cautious in their expectations on the overall pace of economic growth. The National Association for Business Economics (NABE) reported Monday that forecasters have raised their expectations for employment, new-home construction and business spending this year. But they held on to their average prediction that the nation’s gross domestic product, or GDP, will grow at a rate of 2.4 percent. That’s a slight improvement from 2011, when economists believe the economy grew 1.6 percent. GDP reflects the economy’s total output of goods and services. The latest forecast is in line with one issued by the group in November that called for the economy to grow 2.4 percent this year. Forecasters predict growth will be stronger in the second half of 2012 than it will be through June. NABE economists see the unemployment rate sticking at 8.3 percent this year, matching January figures. That’s improved from their November forecast of 8.9 percent. Unemployment peaked at 10 percent in October of 2009. The economists expect job growth to accelerate next year, and forecast the unemployment rate will fall to 7.8 percent. GDP growth needs to be above 3 percent to significantly lower unemployment. The economists predict builders will break ground on 700,000 homes this year, up 15 percent compared with 2011. In November, they expected new-home
construction of about 660,000. They predict 850,000 will be built in 2013. Panelists are also still forecasting strong business spending growth this year. They’ve slightly raised their forecast to 8.1 percent growth this year. For 2013, spending should slow slightly, but still remain strong at 7.3 percent, the forecast said. Industrial production is expected to increase moderately at 3.5 percent this year and 3.3 percent in 2013. Despite a brightening forecast for employment, housing and business spending, the NABE Outlook Panel of 45 economists expects consumers to continue to pennypinch this year. They still predict spending will increase just 2.1 percent this year and 2.3 percent next year. The rate is below historical average of 2.8 percent, highlighting an economy that’s heading in the right direction, but still slow-going. Economists have lowered their expectations for exports this year as well. They now expect 4.6 percent growth in 2012, compared to their November prediction of 6.1 percent. Their projection for import growth in 2012 was also lowered from 4.3 percent to 3.5 percent. They expect both rates to improve in 2013. Overall, economists say they are more confident in their predictions than just a few months ago. Less than half of economists surveyed by the NABE this month call their forecasts “somewhat uncertain” or “much more uncertain than usual.” In November, more than twothirds of respondents characterized their predictions as uncertain.
Northland Area Builders Association, 29148 Mail Road, Danbury, WI 54830 Tel: 715-259-3486 | Fax: 888-825-8073 Email: naba@centurytel.net | Online: www.northlandareabuilders.com
Housing Dashboard Wisconsin Unemployment Rate
Wisconsin Construction Employment
(seasonally adjusted)
(seasonally adjusted)
Jan
6.9%
90,000
Wisconsin Privately Owned Housing Starts (# of units) 233
Dec Nov Oct
7.1% 7.3% 7.7%
85,800 83,700 86,000
328 491 645
2011
71%
2009
70.4%
Source: US Census Bureau
Source: US Bureau of Labor Statistics & US Census Bureau
1 & 2 Family Housing Permits
2010
Ashland County
Bayfield County
Burnett County
Sawyer County
Washburn County
0 0 0 0
2 2 1 9
2 3 7 10
4 2 5 13
0 0 4 5
1
57
93
82
47
2011-2012 January December November October 2011 Year End Totals
Source: US Census Bureau/Wisconsin Builders Association
Wisconsin Projected Households 2005 - 2030
2000
2005
2010
2015
2025
2025
2030
Ashland County
6718
6935
7160
7370
7545
7674
7735
Bayfield County
6207
6624
7045
7484
7857
8135
8289
Burnett County
6613
7162
7670
8179
8629
8943
9120
Sawyer County
6640
7233
7830
8442
8952
9343
9599
Washburn County
6604
7151
7676
8219
8707
9067
9335
National
2084556
2208571
2322062
2442354
2557504
2654905
2738477
Source: US Census Bureau
Every 1,000 new homes built supports 2,043 full-time permanent jobs. Construction jobs supported by home construction in 2005: 73,227 Construction jobs supported by home construction in 2010: 12,985 WISCONSIN JOBS LOST DUE TO HOUSING SLUMP:
60,242
(Does not include indirect job losses - National Association of Home Builders)
Framing Lumber Prices
CME Futures Price
Wisconsin Homeowner Vacancy Rates
2011
2010
(per 1000 board feet)
Random Lengths Composite Price
Feb 24
284
266.9
First Quarter
1.8
1.2
Jan 27
£284
£240
Second Quarter
1.9
1.7
Dec 30
£270
£249.30
Third Quarter
2.5
1.9
Dec 16
£265
£232.00
Fourth Quarter
2.3
1.6
Source: US Census Bureau
Source: NAHB
2011-2012 Terms on Mortgages
Fixed rate 30 year conventional
Effective Rate (contract interest rate plus fees and charges)
Share of total market
Fixed rate 15 year conventional
Effective Rate (contract interest rate plus fees and charges)
Share of total market
January
4.44
63
5.65
5.6
December
4.45
70.0
4.40
3.3
November
4.52
70.3
4.32
4.7
October
4.48
72.4
4.14
2.0
Source: Federal Housing Finance Agency
Every 1,000 new homes built generates $209.5 million in income for Wisconsin residents & $7.4 million in state and local government revenue. Wisconsin income provided by home construction in 2005: Wisconsin income provided by home construction in 2010: WISCONSIN WAGES LOST DUE TO HOUSING SLUMP:
Economic Confidence Rises to Highest Level Since 2008 The most recent Gallup poll shows that Americans’ confidence in the economy rose to its highest level since Gallup began tracking daily confidence measures in 2008. Despite a previous score of -25 for the prior week, possibly attributed to rising gas prices, the Economic Confidence Index rose to -18. Current numbers show another rung reached in the rising trend for economic confidence, which has been ascending for the sixth straight month. The recent jobless report could have sparked the movement. That report, out last Friday, showed 227,000 jobs were added in February.
$7.5B $1.3B $6.2B
Foreclosures Comprise a Smaller Slice of 2011 Home Sales Bank-owned homes and short sales last year accounted for the smallest slice of overall sales in three years but still made up nearly a quarter of all U.S. homes sold in 2011. Some 907,138 sales were made last year of foreclosed-upon homes and others that were in some stage of the process. They represented about 23 percent of all home sales in 2011, foreclosure listing firm RealtyTrac Inc. said. As a percentage of all homes sold, sales of bank-owned properties and other homes on the foreclosure track last year were back down to 2008 levels. But they remained an outsize portion of total sales compared 2005, when sales of previously occupied homes peaked and foreclosure sales comprised less than 1 percent of all sales, the firm said. The sales peaked in 2009 at about 1.1 million and made up about 37 percent of all sales. The decline in foreclosure-related sales last year coincided with a sharp drop in the number of homes taken back by lenders as the banking industry wrestled with foreclosure-abuse claims.
bank-owned listings in the next three to six months,” said Daren Blomquist, a vice president at RealtyTrac. At the end of January, there were 645,000 bank-owned homes in the U.S. that had yet to be sold, representing a 17-month supply at the current sales pace, Blomquist said. In addition, another 710,000 homes were in some stage of the foreclosure process. Other estimates put the number of homeowners who are either behind on their mortgage payments or in foreclosure at the end of last year more than 6 million. That represents a glut of potential homes that could still hit the market in coming months – good news for bargain hunters, as foreclosures typically sell at big discounts to other properties. Homes in the foreclosure process also sometimes sell for less than what the previous owners owed on their mortgage, a transaction known as a short sale. More foreclosure sales also means potentially more pain for homeowners, who could see the value of their homes erode further as neighboring foreclosures sell.
A $25 billion settlement reached earlier this year between the nation’s biggest mortgage lenders and 49 state attorneys general has begun paving the way for more foreclosures this year, however.
Combined, bank-owned homes and those still in the foreclosure process sold for an average of $164,349 last year, 33 percent less than the average sale price of all other homes. In 2010, they sold at a 32 percent discount, RealtyTrac said.
“That wave of new foreclosures that we’re seeing is going to translate into more short sale listings and more
Patrick Newport, an economist with IHS Global Insight, said he expects that foreclosures, in addition to weak
demand for homes, high unemployment and other factors, will push U.S. home prices down as much as 10 percent this year. Others say modest increases in sales over the past few months could stop prices from falling by late winter or early spring. Sales of all previously occupied homes rose last year to 4.26 million from 4.19 million in 2010. Sales of new homes, which account for less than 10 percent of the housing market, totaled 304,000 last year – the fewest on records dating back to 1963. Bank-owned homes, which are sold after being repossessed, made up nearly 14 percent of all home sales last year and averaged 40 percent less than properties not in foreclosure. Homes in some stage of the foreclosure process – in default or scheduled for auction – comprised 9 percent of all sales in 2011. On average, they sold for 22 percent less than other types of homes. All told, foreclosure-related sales nationwide declined 2.2 percent from a year earlier, RealtyTrac said. Nevada led all states with foreclosurerelated sales making up 54 percent of all home sales last year, up 17 percent from a year earlier. California had the highest number: 246,780, or 43 percent of total home sales in the state. Foreclosure-related sales also comprised at least 20 percent of all home sales last year in Arizona, Colorado, Florida, Georgia, Idaho, Illinois, Michigan and Oregon.